Credit Suisse Granted Exemption from Disqualification for Asset Management Exemption Business Despite History of Abuses

U.S. Department of Labor Puts Pension Funds at Risk

WASHINGTON, DC – Global Financial Integrity (GFI) expressed disappointment today in the U.S. Department of Labor’s (DOL) decision that the Credit Suisse asset management entities can continue to enjoy their privileged QPAM (Qualified Professional Asset Manager) status, despite a regulation requiring that affiliates and related parties of a company convicted of tax-related felonies must lose that special status under U.S. law.

The Credit Suisse-related and affiliated QPAMs have been granted an exemption from the disqualification, albeit for five years instead of the usual ten, in opposition to January 2015 testimony by GFI’s Director of Government Affairs, Heather Lowe. “Unfortunately, the Department of Labor’s decision allows the Credit Suisse group to carry on business as usual, despite U.S. regulations designed to protect U.S. pensions from potentially being subject to illegal dealings,” Ms. Lowe stated today. “As far as we’re aware, DOL has never denied a request for an exemption from disqualification,” Ms. Lowe continued.

QPAM status allows these asset management companies to trade plan assets on an arm’s length basis with related companies—prohibited activity for asset managers that do not have the special QPAM status because of concerns about self-dealing to benefit the companies and not pension-holders. The main purpose of the regulation is to protect U.S. pension funds from mismanagement.

Ms. Lowe explained, “DOL’s primary justification for granting the exemption is that there was no evidence that the Credit Suisse asset management companies had engaged in any of Credit Suisse AG’s illegal activities and should therefore not be punished. While that may be the case, that should have been irrelevant when considering whether to grant an exemption to the required disqualification. The disqualification specifically covers affiliates and related parties that have not been convicted of the felony offense.”

According to a report, in May Credit Suisse quietly withdrew their application for a waiver from the SEC of the three-year denial of “seasoned issuer” status that was also triggered by the Credit Suisse AG conviction, after it became clear that the SEC was not going to approve it.

Numerous sanctions have been levied against Credit Suisse group members in different parts of the world over the past several years. “These varied instances of serious regulatory infractions and criminal activity engaged in by different entities in the Credit Suisse corporate group suggest that there is a real risk that the QPAMs might also be engaging in activity that is not in the best interest of the client, if not illegal activity,” Ms. Lowe noted. “Either way, the Department of Labor has put U.S. pension funds at risk.”